Local steel prices may rise with international prices going up on input costs

KOLKATA: Domestic steelmakers are bracing for a price hike, with benchmark international prices firming up due to rising input costs. This would reverse the downward trend of the last few months.

A revival in passenger car demand has also boosted confidence, with large steel players like Essar Steel, JSW and Steel Authority of India (SAIL) expecting a post-monsoon pick-up in economic activity.

However, the price hike is expected to be muted with rupee depreciation making imports costlier. "Global steel prices have rebound in recent weeks on the back of higher input costs. Since Indian prices are aligned to international prices, it is reasonable to expect that Indian prices will also firm up," an Essar Steel spokesperson said.

"Benchmark global prices of hot rolled coils (HRC) have gone up by $10 per tonne in the last one month. Raw material prices are also climbing. From recent lows, iron ore prices have jumped to $120-125 per tonne, while coal is up nearly $4-5 per tonne. In the domestic market, the third and the fourth quarters are likely to see a spurt in demand," SAIL Chairman CS Verma said.

Local steel prices have remained range-bound during September-October 2012 as weak global demand and the construction industry's monsoon sluggishness caused a slide in prices.

"Indian steel prices are likely to increase from November onwards led by the construction industry, which renews its activities after the lean monsoon season and with increased demand from the auto industry," Venkatesan Subramanian, director, metals & minerals practice, Frost & Sullivan said.

However, analysts don't expect that prices will rise significantly. "Steel companies are carrying a lot of inventory from the last two quarters which they need to liquidate first.

If they increase prices, it will be more of a seasonal hike. Of course, domestic companies will get some cushion due to rupee depreciation which will make imports more expensive," said Anirudha Dutta, head of research, India at CLSA.

Subramanian also sees a nominal increase in steel prices, in line with raw material prices.